FACTORING AS A SOURCE OF
By: Berwyn J. Kemp
Do you supply products and services to commercial customers and are unable
to secure traditional bank financing? If so, do you very often have to wait
30 to 90 days or longer for your customers to pay your invoices? Which often
leaves you short of the capital you need to effectively operate and build
If you answered yes to both of these questions. Then there could be a source
of business funding that could work for your business. That source of
funding is the factoring of your accounts receivable invoices. Which could
very well give you the capital you need to more effectively operate, expand,
and grow. Because you'll no longer have to wait for your customers to pay
What's more, the factoring of your accounts receivable invoices is much
easier source of financing to access that traditional commercial bank
financing. Because the factor doesn't look at the credit rating of your
business, nor do they look at your personal credit rating. Both of which can
be a problem particularly for new businesses. And other kinds of Businesses
that don't meet the very conservative standards of most commercial banks.
Instead factors base their decision to factor or not to factor your invoices
on the credit of your customers.
Therefore, if you supply products and services to commercial customers who
have good credit ratings, such as, government agencies, well established
commercial firms, hospitals, universities, insurance companies, etc.. Then
you can more than likely qualify for accounts receivable factoring.
In addition, as a rule, factors don't require long term contracts as in more
traditional kinds of lending, nor do they ever audit your books. For these
reasons and more, this makes obtaining an accounts receivable factoring loan
a relatively quick, simple, and easy process, to give you the business funds
that you need.
What the factor basically does is advance you between 70% to 80% of the
value of your commercial invoices. The factor then collects the invoices
directly from your customer. Once the factor collects on the invoices they
subtract their fee, and then sends you the balance of the invoice amount.
What will factoring cost you? Well, factoring fees start at about 4% for
invoices collected within 30 days goes up to about 15% for invoices
collected in 120 days or so. Thus, the fee depends on when the factor
actually collects the invoice.
There are some business people who wrongly believe that factoring makes them
appear financially unsound to their customers. If this is what you believe
it is simply not true. Today many modern firms are factoring their accounts
receivables. As a way to get the capital they need to effectively operate
and build their profits faster. In fact, many commercial banks are actively
referring they can't finance to factors. In addition, a number of major
have actually opened factoring divisions.
While factoring is not right for every business, it could be right for your
business as a source of business funds that works for you. Particularly if
your business is new, or you are unable to tap traditional commercial bank
financing. Then factoring could very well be the answer to your business
Berwyn J. Kemp is a financial consultant who helps businesses get funding to
start up, more effectively operate, or expand. For full information on his
funding products and services visit him at:
http://www.bkempassoc.CityMax.com , NOW!